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that book about china

A report on China’s “bureaucrat-capitalist class” explains that nearly 90% of the economy’s billionaires – or about 2,900 - are the children of senior cadres. Collectively, the group is said to have assets worth over CNY2 trillion.

These billionaires are predominantly in: finance, international trade, property development and equities.

Where are they? Here is the breakdown: Guangdong, 1,566; Zhejiang, 462; Shanghai, 225; Beijing, 195; Jiangsu, 172; Shandong, 141; Jiangsu, 172; Shandong, 141; Fujian, 92; Liaoning, 79.

Critics inside the country are upset. Many say the wealth represent corruption. Worse, this is about nepotism. At the start of reforms, Deng Xiaoping said: “Let some people get rich first.” Many are asking now whether “some” aren’t rich enough already.

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[Note: CNY1bn = US$140mn]

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No one could be more proud than Steven Spielberg. With only one letter to the organizers of the games, he managed to accomplished more than untold numbers of leaders have over decades.

Spielberg has expressed regret over his attempt to link politics to the games, but look how things turned out: China has stepped up humanitarian efforts in Darfur, and it has agreed to hold talks on human rights with the United States. All of this accomplished with a single letter!

You almost wish that Spielberg hadn’t done it, though. Now, every celebrity is going to think that they can effect change from Hollywood.

Anyway, not sure what to make of China’s overtures. It could be genuine, or it could be as the NY Times puts it, “a move… aimed at countering criticism from activists ahead of the Olympic Games.”

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Ten years ago, there was plenty of talk about how growth on the coastal cities was doomed. Everyone was looking to the second- and third-tier cities, and Sichuan Province was really where it was at, brother. Taking a page from American history, the Chinese government had urged everyone: “Go West!”

The latest buzz is a push into the north, apparently. Guess what: Anhui is the new Sichuan! Oh, my god. Don’t get me wrong. I love Anhui, especially the people. But there is nothing happening there, especially not for those involved in contract manufacturing.

For whatever reason, people like to talk about the demise of Guandong Province (h/t CLB.com). We’ve been hearing it for years. The factories are moving to Shanghai, or else they are heading inland, or they are off to Vietnam. What most fail to understand is the value of manufacturing clusters. Numerous economists have described the phenomenon, and it is why industry is not going anywhere anytime soon.

Consider that in order to get a products made, factories need a critical mass of sub-suppliers and service providers. If you’re making shoes, for example, you need to be able to pick up the phone and quickly get any number of people over to your office immediately: Leather vendors, adhesives suppliers, machine repairmen, a supplier of cardboard boxes. There are dozens of behind-the-scenes players who are necessary in a production process like this one.

On one project I was involved in, there was a problem with some packaging labels. The factory called the agent who provided the labels, and he was there in no time flat. He also knew what he was talking about. There were many different types of adhesives, which went on the back of the labels. Long story short, it makes a big difference that you have a critical mass of game players there all in the same space.

Companies that do not rely upon clustering and its benefits may move inland, but there is no way that entire industries - whole clusters – are picking up and moving to another region. When the regions clusters were originally formed, it had a lot to do with a tremendous cost differential. Today, the incremental benefit – if there even is one – is marginal at best. Whatever savings there are in labor are typically eaten up by increases in logistics costs, I am afraid to say.

The title of this post is a quote from an aging Mark Twain, who was very much alive at the time he said it: “The reports of my death have been greatly exaggerated.” This one applies to Guangdong Province and its robust manufacturing sector.

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Someone has declared “the party is over” because of looming unemployment (due to a downturn in the global economy). I have doubts that China’s economy is going to slow so much that it will affect employment , but, anyway, a decrease in demand for labor might be helpful in offseting the effects of “agflation” (agricultural inflation).

What concerns me far more than the cost of labor in China is the quality of labor.

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